It sounds like you were trying to sell a rental property but that sale fell through? If the bank is foreclosing, it sounds like you aren't making your payments? Most mortgages require homeowners to keep hazard insurance policies in effect on their homes as long as they have the mortgage. If you didn't pay for that insurance, the bank probably purchased it and added the premium to your loan balance.
It will definitely damage your credit if it forecloses. Foreclosures used to clear off credit reports in 7 years, but I've heard that it may now show for 10. Either way, it will definitely affect your ability to get new credit, including refinancing.
I doubt that the bank will come after you, but you could check with Legal Aid Society http://www.lasoc.com/ContentDetail.aspx?Id=14&ContentTypeId=1&CategoryId=2
Or the California Consumer Home Mortgage site :